Suppose an economy is in long-run equilibrium. The central bank reduces the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium. LRAS Aggregate Supply Aggregate Demand Aggregate Supply Aggregate Demand Quantity of Output Now adjust the graph to show the new long-run equilibrium. What causes the economy to move from its short-run equilibrium to its long-run equilibrium? O The government increases spending to increase aggregate demand. O Nominal wages, prices, and perceptions adjust downward to this new price level. O The government increases taxes to curb aggregate demand. O Nominal wages, prices, and perceptions adjust upward to this new price level. Price Level

Suppose an economy is in long-run equilibrium. The central bank reduces the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium. LRAS Aggregate Supply Aggregate Demand Aggregate Supply Aggregate Demand Quantity of Output Now adjust the graph to show the new long-run equilibrium. What causes the economy to move from its short-run equilibrium to its long-run equilibrium? O The government increases spending to increase aggregate demand. O Nominal wages, prices, and perceptions adjust downward to this new price level. O The government increases taxes to curb aggregate demand. O Nominal wages, prices, and perceptions adjust upward to this new price level. Price Level

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

"Valerie earns $10,000 from 40% ownership of her family business." This question is concerned with the Circular-Flow Diagram. Is this an example of flow of dollar from firm to household?
Explain Isoquant curve. Explain Isocost line. The difference between the two and what should be tangent?
Tara loves to go through the Saturday paper and cut out supermarket coupons. How do you think Tara's coupon-clipping habits apply to the concept of price discrimination?
Note: The answer should be typed.
Consider the data points in the table below Y. 80.0 60.0 1.0 2.0 3.0 400 200 00 4.0 Graphing these points results in line that passes through the point (3.0, (Round your response to one decimal place) 5435
explain how the curve shift on a graph and why they shift
Which of the curves in the following graph is the average total cost curve?
4. A decision at the margin Raphael is a hard-working college senior. One Saturday, he decides to work nonstop until he has answered 100 practice problems for his math course. He starts work at 8:00 AM and uses a table to keep track of his progress throughout the day. He notices that as he gets tired, it takes him longer to solve each problem. Time Total Problems Answered 8:00 AM 9:00 AM 40 10:00 AM 70 11:00 AM 90 Noon 100 Use the table to answer the following questions. The marginal, or additional, gain from Raphael's first hour of work, from 8:00 AM to 9:00 AM, is problems. The marginal gain from Raphael's third hour of work, from 10:00 AM to 11:00 AM, is problems. Later, the teaching assistant in Raphael's math course gives him some advice. "Based on past experience," the teaching assistant says, "working on 15 problems raises a student's exam score by about the same amount as reading the textbook for 1 hour." For simplicity, assume students always cover the same number of pages…